The Gamestop (GME) stock is experiencing more volatility than Bitcoin.
These days, the cryptocurrency queen seems to be caged in a sideways channel that fluctuates between $31,000 and $32,000. Meanwhile, on the NYSE, Gamestop is livening things up for investors.
In just a few days, the company’s shares have surged. Yesterday alone, the stock gained 93.4% from $76 to $147, and today’s pre-market open indicates another 30% gain.
In just one month, GameStop has seen its shares rise almost 700%. But what happened?
Some guys who hang out on a Reddit group, WallstreetBets, started betting heavily on GameStop’s rising stock.
Melvin Capital, a hedge fund that had a basket of stocks it was aiming to sell short, found itself taking a loss on its hedge fund. In practice, a group of very young people brought a financial bigwig to its knees.
Two companies stepped in to inject $2.75 billion into the hedge fund. This allowed Melvin Capital to sustain losses and close short positions on GameStop.
Technically, what is called a short squeeze occurred, i.e. a sudden increase in price, at a time when investors had built up short positions.
According to Cryptonomist trader Federico Izzi, the events that took place with Gamestop’s stock are destined to mark a turning point:
All this happened just when GameStop was in the middle of a crisis, so much so that in recent days, due to the pandemic, it had announced the closure of over 200 outlets worldwide.
GameStop is in fact a chain of video game shops. Like everyone else, it is dealing with the consequences of the Covid-19 pandemic. The stock market rally of recent days may save it. However, analysts note that too rapid a rise can lead to equally rapid falls. Those who are familiar with Bitcoin know something about this.